Revenue from Contracts with Customers

On January 1, 2018, the Company adopted the new accounting standard for revenue from contracts with customers on a retrospective basis. See Note 2 for additional information on the adoption of the new accounting standard.

The following tables present revenue disaggregated by segment on an adjusted operating basis with a reconciliation of segment revenues to those reported on the Consolidated Statements of Operations:



	Three Months Ended June 30, 2018
	Advice & Wealth Management		Asset Management		Annuities		Protection		Corporate & Other		Total Segments		Non-operating Revenue		Total
	(in millions)
Management and financial advice fees:
Asset management fees:
Retail	$	—	$	472	$	—	$	—	$	—	$	472	$	—	$	472
Institutional	—		109		—		—		—		109		—		109
Advisory fees	706		—		—		—		—		706		—		706
Financial planning fees	80		—		—		—		—		80		—		80
Transaction and other fees	92		48		15		2		—		157		—		157
Total management and financial advice fees	878		629		15		2		—		1,524		—		1,524

Distribution fees:
Mutual funds	184		68		—		—		—		252		—		252
Insurance and annuity	231		42		84		10		—		367		—		367
Other products	147		—		—		—		—		147		—		147
Total distribution fees	562		110		84		10		—		766		—		766

Other revenues	47		1		—		—		—		48		—		48
Total revenue from contracts with customers	1,487		740		99		12		—		2,338		—		2,338

Revenue from other sources ⁽¹⁾	76		15		523		521		57		1,192		55		1,247
Total segment gross revenues	1,563		755		622		533		57		3,530		55		3,585
Less: Banking and deposit interest expense	20		—		—		—		1		21		—		21
Total segment net revenues	1,543		755		622		533		56		3,509		55		3,564
Less: intersegment revenues	247		12		90		13		—		362		6		368
Total net revenues	$	1,296	$	743	$	532	$	520	$	56	$	3,147	$	49	$	3,196



	Three Months Ended June 30, 2017
	Advice & Wealth Management		Asset Management		Annuities		Protection		Corporate & Other		Total Segments		Non-operating Revenue		Total
	(in millions)
Management and financial advice fees:
Asset management fees:
Retail	$	—	$	460	$	—	$	—	$	—	$	460	$	—	$	460
Institutional	—		106		—		—		—		106		—		106
Advisory fees	606		—		—		—		—		606		—		606
Financial planning fees	75		—		—		—		—		75		—		75
Transaction and other fees	93		53		15		1		—		162		—		162
Total management and financial advice fees	774		619		15		1		—		1,409		—		1,409

Distribution fees:
Mutual funds	178		71		—		—		—		249		—		249
Insurance and annuity	210		41		82		7		—		340		—		340
Other products	119		—		—		—		—		119		—		119
Total distribution fees	507		112		82		7		—		708		—		708

Other revenues	46		—		—		—		—		46		—		46
Total revenue from contracts with customers	1,327		731		97		8		—		2,163		—		2,163

Revenue from other sources ⁽¹⁾	61		16		530		509		56		1,172		39		1,211
Total segment gross revenues	1,388		747		627		517		56		3,335		39		3,374
Less: Banking and deposit interest expense	12		—		—		—		1		13		—		13
Total segment net revenues	1,376		747		627		517		55		3,322		39		3,361
Less: intersegment revenues	231		12		87		15		—		345		4		349
Total net revenues	$	1,145	$	735	$	540	$	502	$	55	$	2,977	$	35	$	3,012



	Six Months Ended June 30, 2018
	Advice & Wealth Management		Asset Management		Annuities		Protection		Corporate & Other			Total Segments		Non-operating Revenue		Total
	(in millions)
Management and financial advice fees:
Asset management fees:
Retail	$	—	$	952	$	—	$	—	$	—		$	952	$	—	$	952
Institutional	—		220		—		—		—			220		—		220
Advisory fees	1,397		—		—		—		—			1,397		—		1,397
Financial planning fees	148		—		—		—		—			148		—		148
Transaction and other fees	181		96		29		4		—			310		—		310
Total management and financial advice fees	1,726		1,268		29		4		—			3,027		—		3,027

Distribution fees:
Mutual funds	374		137		—		—		—			511		—		511
Insurance and annuity	453		87		168		18		—			726		—		726
Other products	292		—		—		—		—			292		—		292
Total distribution fees	1,119		224		168		18		—			1,529		—		1,529

Other revenues	88		2		—		—		—			90		—		90
Total revenue from contracts with customers	2,933		1,494		197		22		—			4,646		—		4,646

Revenue from other sources ⁽¹⁾	147		39		1,038		1,030		115			2,369		116		2,485
Total segment gross revenues	3,080		1,533		1,235		1,052		115			7,015		116		7,131
Less: Banking and deposit interest expense	36		—		—		—		2			38		—		38
Total segment net revenues	3,044		1,533		1,235		1,052		113			6,977		116		7,093
Less: intersegment revenues	487		24		180		29		(1		)	719		10		729
Total net revenues	$	2,557	$	1,509	$	1,055	$	1,023	$	114		$	6,258	$	106	$	6,364



	Six Months Ended June 30, 2017
	Advice & Wealth Management		Asset Management		Annuities		Protection		Corporate & Other		Total Segments		Non-operating Revenue		Total
	(in millions)
Management and financial advice fees:
Asset management fees:
Retail	$	—	$	900	$	—	$	—	$	—	$	900	$	—	$	900
Institutional	—		207		—		—		—		207		—		207
Advisory fees	1,176		—		—		—		—		1,176		—		1,176
Financial planning fees	139		—		—		—		—		139		—		139
Transaction and other fees	182		104		28		3		—		317		—		317
Total management and financial advice fees	1,497		1,211		28		3		—		2,739		—		2,739

Distribution fees:
Mutual funds	386		151		—		—		—		537		—		537
Insurance and annuity	409		82		160		15		—		666		—		666
Other products	228		—		—		—		—		228		—		228
Total distribution fees	1,023		233		160		15		—		1,431		—		1,431

Other revenues	83		1		—		—		—		84		—		84
Total revenue from contracts with customers	2,603		1,445		188		18		—		4,254		—		4,254

Revenue from other sources ⁽¹⁾	116		27		1,047		1,020		113		2,323		84		2,407
Total segment gross revenues	2,719		1,472		1,235		1,038		113		6,577		84		6,661
Less: Banking and deposit interest expense	22		—		—		—		1		23		—		23
Total segment net revenues	2,697		1,472		1,235		1,038		112		6,554		84		6,638
Less: intersegment revenues	468		23		171		30		—		692		8		700
Total net revenues	$	2,229	$	1,449	$	1,064	$	1,008	$	112	$	5,862	$	76	$	5,938

⁽¹⁾Revenues not included in the scope of the revenue from contracts with customers standard. The amounts primarily consist of revenue associated with the manufacturing of insurance and annuity products or financial instruments.

The following discussion describes the nature, timing, and uncertainty of revenues and cash flows arising from the Company’s contracts with customers on a consolidated basis.

Management and Financial Advice Fees

Asset Management Fees

The Company earns revenue for performing asset management services for retail and institutional clients. The revenue is earned based on a fixed or tiered rate applied, as a percentage, to assets under management. Assets under management vary with market fluctuations and client behavior. The asset management performance obligation is considered a series of distinct services that are substantially the same and are satisfied each day over the contract term. Asset management fees are accrued, invoiced and collected on a monthly or quarterly basis.

The Company’s asset management contracts for Open Ended Investment Companies (“OEICs”) in the UK and Société d'Investissement à Capital Variable (“SICAVs”) in Europe include performance obligations for asset management and fund distribution services. The amounts received for these services are reported as management and financial advice fees. The revenue recognition pattern is the same for both performance obligations as the fund distribution services revenue is variably constrained due to factors outside the Company’s control including market volatility and client behavior (such as how long clients hold their investment) and not recognized until assets under management are known.

The Company may also earn performance-based management fees on institutional accounts, hedge funds, collateralized loan obligations (“CLOs”), OEICs, SICAVs and property funds based on a percentage of account returns in excess of either a benchmark index or a contractually specified level. This revenue is variable and impacted primarily by the performance of the assets being managed compared to the benchmark index or contractually specified level. The revenue is not recognized until it is probable that a significant reversal will not occur. Performance-based management fees are invoiced on a quarterly or annual basis.

Advisory Fees

The Company earns revenue for performing investment advisory services for certain brokerage customer’s discretionary and non-discretionary managed accounts. The revenue is earned based on a contractual fixed rate applied, as a percentage, to the market value of assets held in the account. The investment advisory performance obligation is considered a series of distinct services that are substantially the same and are satisfied each day over the contract term. Advisory fees are accrued daily and invoiced or charged on a monthly or quarterly basis.

Financial Planning Fees

The Company earns revenue for providing financial plans to its clients. The revenue earned for each financial plan is either a fixed fee (received monthly, quarterly or annually) or a variable fee (received monthly or quarterly) based on a contractual fixed rate applied, as a percentage, to assets held in a client’s investment advisory account. The financial planning fee is based on the complexity of a client’s financial and life situation and his or her advisor’s experience. The performance obligation is satisfied at the time the financial plan is delivered to the customer. The Company records a contract liability for the unearned revenue when cash is received before the plan is delivered. The financial plan contracts with clients are annual contracts. Amounts recorded as a contract liability are recognized as revenue when the financial plan is delivered, which occurs within the annual period.

For fixed fee arrangements, revenue is recognized when the financial plan is delivered. The Company accrues revenue for any amounts that have not been received at the time the financial plan is delivered.

For variable fee arrangements, revenue is recognized for cash that has been received when the financial plan is delivered. The amount received after the plan is delivered is variably constrained due to factors outside the Company’s control including market volatility and client behavior. The revenue is recognized when it is probable that a significant reversal will not occur that is generally each month or quarter end as the advisory account balance uncertainty is resolved.

Contract liabilities for financial planning fees, which are included in other liabilities in the Consolidated Balance Sheets, were $129 million and $134 million as of June 30, 2018 and December 31, 2017, respectively.

The Company pays sales commissions to advisors when a new financial planning contract is obtained or when an existing contract is renewed. The sales commissions paid to the advisors prior to financial plan delivery are considered costs to obtain a contract with a customer and are initially capitalized. When the performance obligation to deliver the financial plan is satisfied, the commission is recognized as distribution expense. Capitalized costs to obtain these contracts are reported in other assets in the Consolidated Balance Sheets, and were $105 million and $109 million as of June 30, 2018 and December 31, 2017, respectively.

Transaction and Other Fees

The Company earns revenue for providing customer support, shareholder and administrative services (including transfer agent services) for affiliated mutual funds and networking, sub-accounting and administrative services for unaffiliated mutual funds. The Company also receives revenue for providing custodial services and account maintenance services on brokerage and retirement accounts that are not included in an advisory relationship. Transfer agent and administrative revenue is earned based on either a fixed rate applied, as a percentage, to assets under management or an annual fixed fee for each fund position. Networking and sub-accounting revenue is earned based on either an annual fixed fee for each account or an annual fixed fee for each fund position. Custodial and account maintenance revenue is generally earned based on a quarterly or annual fixed fee for each account. Each of the customer support and administrative services performance obligations are considered a series of distinct services that are substantially the same and are satisfied each day over the contract term. Transaction and other fees (other than custodial service fees) are invoiced or charged to brokerage accounts on a monthly or quarterly basis. Custodial service fees are invoiced or charged to brokerage accounts on an annual basis. Contract liabilities for custodial service fees, which are included in other liabilities in the Consolidated Balance Sheets, were $32 million and nil as of June 30, 2018 and December 31, 2017, respectively.

The Company earns revenue for providing trade execution services to franchise advisors. The trade execution performance obligation is satisfied at the time of each trade and the revenue is primarily earned based on a fixed fee per trade. These fees are invoiced and collected on a semi-monthly basis.

Distribution Fees

Mutual Funds and Insurance and Annuity Products

The Company earns revenue for selling affiliated and unaffiliated mutual funds, fixed and variable annuities and insurance products. The performance obligation is satisfied at the time of each individual sale. A portion of the revenue is based on a fixed rate applied, as a percentage, to amounts invested at the time of sale. The remaining revenue is recognized over the time the client owns the investment or holds the contract and is generally earned based on a fixed rate applied, as a percentage, to the net asset value of the fund, or the value of the insurance policy or annuity contract. The ongoing revenue is not recognized at the time of sale because it is variably constrained due to factors outside the Company’s control including market volatility and client behavior (such as how long clients hold their investment, insurance policy or annuity contract). The revenue will not be recognized until it is probable that a significant reversal will not occur.

The Company earns revenue for providing unaffiliated partners an opportunity to educate the Company’s advisors or to support availability and distribution of their products on the Company’s platforms. These payments allow the outside parties to train and support the advisors, explain the features of their products and distribute marketing and educational materials, and support trading and operational systems necessary to enable the Company’s client servicing and production distribution efforts. The Company earns revenue for placing and maintaining unaffiliated fund partners and insurance companies’ products on the Company’s sales platform (subject to the Company’s due diligence standards). The revenue is primarily earned based on a fixed fee or a fixed rate applied, as a percentage, to the market value of assets invested. These performance obligations are considered a series of distinct services that are substantially the same and are satisfied each day over the contract term. These fees are invoiced and collected on monthly basis.

Other Products

The Company earns revenue for selling unaffiliated alternative products. The performance obligation is satisfied at the time of each individual sale. A portion of the revenue is based on a fixed rate applied, as a percentage, to amounts invested at the time of sale. The remaining revenue is recognized over the time the client owns the investment and is earned generally based on a fixed rate applied, as a percentage, to the market value of the investment. The ongoing revenue is not recognized at the time of sale because it is variably constrained due to factors outside the Company’s control including market volatility and client behavior (such as how long clients hold their investment). The revenue will not be recognized until it is probable that a significant reversal will not occur.

The Company earns revenue from brokerage clients for the execution of requested trades. The performance obligation is satisfied at the time of trade execution and amounts are received on the settlement date. The revenue varies for each trade based on various factors that include the type of investment, dollar amount of the trade and how the trade is executed (online or broker assisted).

The Company earns revenue for placing clients’ deposits in its brokerage sweep program with third-party banks. The amount received from the third-party banks is impacted by short-term interest rates. The performance obligation with the financial institutions that participate in the sweep program is considered a series of distinct services that are substantially the same and are satisfied each day over the contract term. The revenue is earned daily and settled monthly based on a rate applied, as a percentage, to the deposits placed.

Other Revenues

The Company earns revenue from fees charged to franchise advisors for providing various services the advisors need to manage and grow their practices. The primary services include: licensing of intellectual property and software, compliance supervision, insurance coverage, technology services and support, consulting and other services. The services are either provided by the Company or third- party providers. The Company controls the services provided by third parties as it has the right to direct the third parties to perform the services, is primarily responsible for performing the services and sets the prices the advisors are charged. The Company recognizes revenue for the gross amount of the fees received from the advisors. The fees are primarily collected monthly as a reduction of commission payments.

Intellectual property and software licenses, along with compliance supervision, insurance coverage, and technology services and support are primarily earned based on a monthly fixed fee. These services are considered a series of distinct services that are substantially the same and are satisfied each day over the contract term. The consulting and other services performance obligations are satisfied as the services are delivered and revenue is earned based upon the level of service requested. Prior to the implementation of the revenue recognition standard, fees received from the advisors for software licenses, compliance supervision, technology services and support, consulting, and other services were recorded as a reduction to the Company’s expenses to provide the services and totaled $27 million for both the three months ended June 30, 2018 and 2017 and $53 million and $51 million for the six months ended June 30, 2018 and 2017, respectively.

Receivables

Receivables for revenue from contracts with customers are recognized when the performance obligation is satisfied and the Company has an unconditional right to the revenue. Receivables related to revenues from contracts with customers were $638 million and $657 million as of June 30, 2018 and December 31, 2017, respectively.